Dear Mark,
Thanks so much for your help. I will take a look at the two works
cited. And thanks for writing up xtivreg2 - it's really useful!
Sincerely,
Mark
On Mon, Mar 3, 2008 at 5:12 PM, Schaffer, Mark E <[email protected]> wrote:
> Mark
>
> > -----Original Message-----
> > From: [email protected]
> > [mailto:[email protected]] On Behalf Of
> > Mark Dincecco
> > Sent: Monday, March 03, 2008 3:19 PM
> > To: [email protected]
> > Subject: st: xtpcse vs. newey2 or itivreg2
> >
> > Hello,
> >
> > I have an unbalanced panel data set with a very large T to N ratio.
> > Essentially, I follow 5 countries over a period of 200 or more years.
> > I would like to correct for contemporaneously correlated
> > errors, panel heteroskedasticity, and common serial
> > correlation. I have opted to use xtpcsce, newey2, or xtivreg2
> > rather than xtgls following Beck and Katz (1995).
> >
> > The basic specifications look like:
> >
> > *xtpcse
> >
> > xi: xtpcse y x1 x2, corr(ar1)
> >
> > *newey2
> >
> > xi: newey2 y x1 x2, force lag(1)
> >
> > *xtivreg2
> >
> > xi: xtivreg2 y x1 x2, bw(2) robust small
> >
> > I have two questions. The first is the most critical:
> >
> > 1. Is the only difference here between newey2 or xtivreg2 AND
> > xtpcse that xtpcse controls for contemporaneously correlated
> > errors while newey2 or xtivreg2 does not?
>
> Not quite. As I understand it, xtpcse uses a specific functional form,
> namely AR(1). xtivreg2 (and newey2) do not. Rather, they are robust to
> arbitrary autocorrelation, but underlying this are asymptotics that
> require the number of lags used in the calculation (the bandwidth) to go
> off to infinity.
>
> Hayashi's (2000) "Econometrics" textbook has a good discussion. For a
> very abbreviated discussion, see Baum-Schaffer-Stillman in the latest
> issue of the SJ (Vol. 7, No. 4, 2007).
>
> > I ask because newey2 offers better results than xtpcse but I
> > wonder if that is because newey2 does not correct for
> > contemporaneously correlated errors. If not, then I will go
> > with the newey2 estimates.
> >
> > 2. Is the only difference here between newey2 AND xtivreg2
> > that xtivreg makes an adjustment for the degrees of freedom?
>
> No, it's the other way around. newey2 makes a small-sample adjustment
> and reports t-stats. xtivreg2 will make this adjustment if you supply
> the -small- option; without it, it reports z-stats and does not make the
> adjustment.
>
> Also, xtivreg2 has a wide range of kernels available beyond the Bartlett
> kernel ("Newey-West") used by newey2. There are some other differences
> as well (e.g., handling of gaps in time series, which I think xtivreg2
> handles more gracefully - at least, Kit Baum and I put a fair amount of
> thought into how to handle it in the straight time series context).
>
> Cheers,
> Mark (author of xtivreg2)
>
> Prof. Mark E. Schaffer
> Director
> Centre for Economic Reform and Transformation
> Department of Economics
> School of Management & Languages
> Heriot-Watt University
> Edinburgh EH14 4AS UK
> 44-131-451-3494 direct
> 44-131-451-3296 fax
> http://www.sml.hw.ac.uk/cert
>
>
> > I ask simply for completeness.
> >
> > Thanks very much for your help. I really appreciate it.
> >
> > Sincerely,
> > Mark
> >
> > PS. This inquiry was first submitted on Sunday. I thank Clive
> > for his suggestion at that time. However, as he notes his
> > answer was insufficient. I thus resumbit an updated version
> > of the questions now.
> > *
> > * For searches and help try:
> > * http://www.stata.com/support/faqs/res/findit.html
> > * http://www.stata.com/support/statalist/faq
> > * http://www.ats.ucla.edu/stat/stata/
> >
>
> *
> * For searches and help try:
> * http://www.stata.com/support/faqs/res/findit.html
> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
>
*
* For searches and help try:
* http://www.stata.com/support/faqs/res/findit.html
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/
